Minister: Indian Firms Need More Foreign Investment

Mar. 27, 2013 - 01:39PM
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NEW DELHI — There is a renewed call to increase the amount of money that foreign companies can invest in Indian defense companies. Indian Commerce Minister Anand Sharma has asked for an increase in the foreign direct investment (FDI) level from 26 percent to 74 percent.

In a letter he wrote last week to Prime Minister Manmohan Singh, Sharma makes a strong case for the increase. India has received only $4.22 million through FDI in the last decade, Sharma writes.

Defence Minister, A.K. Antony has so far been against increasing the FDI limit beyond 26 percent.

“India will keep relying on weapon imports for several years as the need to acquire weapons and equipment immediately is more paramount,” local defense analyst Nitin Mehta said. “The slow growth of the domestic defense industry cannot merely be corrected by an increase in FDI. A level playing field between state-owned defense companies and private-sector companies, and lowering of bureaucratic hurdles in defense tie-ups, has to be ensured along with increase FDI.”

India continues to import nearly 70 percent of its weapons and equipment from other countries, and the procurements are such a lengthy process that the Indian military seldom receives much-needed weapons on time, an Indian Army official said.

The pitch to increase the FDI limit comes at a time when several defense programs are stuck because of blacklisting of some foreign original equipment manufacturers, including South Africa’s Denel, Singapore Technologies, Israel Military Industries and Rheinmetall. Last month, India’s anti-fraud agency, the Central Bureau of Investigation, launched a probe of Italian-British company AgustaWestland in connection with a helicopter deal.

Since India opened up of the defense sector to private investment, including investment by foreign firms, in 2001, the domestic industry has remained in its infancy. Increase in FDI will encourage major defense companies to forge ties with domestic companies to produce high-tech weapons, a Federation of Indian Chambers of Commerce and Industry executive said.